From the very start, Hewlett-Packard worked to a few fundamental principles. It did not believe in long-term borrowing to secure the expansion of the business. Its recipe for growth was simply that its products needed to be leaders in their markets. It got on with the job. “Our main task is to design, develop and manufacture the finest [electronic equipment] for the advancement of science and the wel- fare of humanity. We intend to devote ourselves to that task,” said Packard in a 1961 memo to employees.
The duo eschewed fashionable management theory. “If I hear anybody talking about how big their share of the market is or what they’re trying to do to increase their share of the market, I’m going to personally see that a black mark gets put in their personnel folder,”
Packard said in a 1974 speech.
The company believed that people could be trusted and should always be treated with respect and dignity. “We both felt fundamen- tally that people want to do a good job. They just need guidelines on how to do it,” said Packard.
H-P believed that management should be available and involved – Managing By Wandering About was the motto. Indeed, rather than the administrative suggestions of management, Packard preferred to talk of leadership.
If there was conflict, it had to be tackled through communica- tion and consensus rather than confrontation. “Their legacy, and the achievement that Packard was most proud of, is a management style based on openness and respect for the individual,” noted Louise Kehoe of the Financial Times in Packard’s obituary.1 Former CEO John Young has observed: “Our basic principles have endured intact since our founders conceived them. We distinguish between core values, and practices; the core values don’t change, but the practices might.”2
Hewlett-Packard was a company built on very simple ideas. While all about were turning into conglomerates, Hewlett and Packard kept their heads down and continued with their methods. When their di- visions grew too big – and by that they meant around 1500 people – they split them up to ensure that they didn’t spiral out of control.
They kept it simple. Nice guys built a nice company. They didn’t do anything too risky or too outlandish. (Packard was skeptical about pocket calculators though, in the end, the company was an early entrant into the market.) They didn’t bet the company on a big deal or get into debt. Indeed, in his research Richard Pascale identified
“terminal niceness” as a potential problem for the company. Being criticized for being too good could only happen in the business world.
For living up to their simple standards, Hewlett-Packard deserve acknowledgement.
Indeed, their values worked to save the company when times were hard. During the 1970s recession, Hewlett-Packard staff took a 10 percent pay cut and worked 10 percent less hours. If the company hadn’t had a long-term commitment to employee stock ownership perhaps they wouldn’t have been so keen to make sacrifices. The company also took advantage of lucky breaks which would have been missed elsewhere – in 1979 one of its engineers found that by heat- ing metal in a specific way, it splattered all over. The decision to exploit this technology launched the ink jet printer business – ten
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years later, this decision became the basis for over $6 billion in H-P revenues.
On Packard’s death in 1996, the company had 100,000 employ- ees in 120 countries with revenues of $31 billion. It continues to move on. H-P chief Lew Platt has suggested that H-P should stand for “healthy paranoia” and explained why: “General Motors, Sears, International Business Machines, were the greatest companies in their industries, the best of the best in the world. These companies did not make gigantic mistakes. They were not led by stupid, inept people.
The only real mistake they made was to keep doing what it was that had made them successful for a little too long.”3
Notes
1 Kehoe, Louise, “Radical who built group with open manage- ment style,” Financial Times, March 28, 1996.
2 Porras, Jerry, & Collins, James, Built to Last, Century, New York, 1994.
3 Kehoe, Louise, “Change while you are ahead,” Financial Times, March 18, 1994.
H oliday I nn
n the Summer of 1951, the Wilson family of Memphis set off on a motoring vacation. There was nothing special about it. Just a couple and their five children heading to Washing- ton, DC. Mr Wilson, Kemmons Wilson, was a Memphis builder and realtor. He and his family became exasperated as their vacation progressed. It was not a great deal of fun staying in expen- sive and poor quality motels.
“A motel room only cost about $8 a night, but the proprietors inevitably charged $2 extra for each child. So the $8 charge soon ballooned into an $18 charge for my family,” Wilson later recounted.
“If we could get a room with two beds, our two daughters slept in one, and Dorothy and I slept in the other. Our three boys slept on the floor in sleeping bags. Sometimes there was a dollar deposit for the key and another dollar for the use of a television.”
So, Wilson (born 1913) decided to build his own – “I was seized by an idea: I could build a chain of affordable hotels, stretching from coast to coast. Families could travel cross-country and stay at one of my hotels every night.” Wilson envisaged 400 such motels. It sounded outrageously ambitious, but Wilson didn’t hang around. He began work while still on vacation. He measured rooms and looked at fa- cilities. His conclusion was that features such as televisions, tele- phones, ice machines and restaurants should be universal. In his imagined hotel chain, children would be free.
When the family returned home, Wilson got straight to work.
He asked a draftsman to draw up some plans. The draftsman had seen a Bing Crosby film the previous evening and labelled the plan, Holiday Inn, from the Crosby movie. Wilson liked it. The name stuck.
The first Holiday Inn was opened in Memphis in 1952. (This fared better than Wilson’s first house, which he had mistakenly built on the wrong lot.) The rest is motel history. Clean and cheap, Holi- day Inns spouted up throughout the USA and then the world. “He
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changed the way America travels,” Senator John Glenn concluded of Wilson. “Kemmons Wilson has transformed the motel from the old wayside fleabag into the most popular home away from home,”
noted TIME. By the time Wilson retired in 1979, Holiday Inn was the world’s largest lodging chain. Today there are 1643 Holiday Inn hotels with 327,059 rooms.